By a 87-12 vote, the Senate passed legislation repealing the 1099 provision, which was included in health care reform as a way to help pay for that measure. Third-party reporting of income makes businesses less likely to try to hide income from the IRS, according to supporters of the provision.

Businesses already are required to file 1099s for payments of more than $600 to unincorporated service providers. The health care reform bill expanded this requirement in 2012 to goods as well as services, and applied it to all types of vendors. Small businesses contend this expansion would create a paperwork nightmare, forcing many of them to file hundreds of 1099 forms instead of just a few.

Senate passage of the bill, which previously cleared the House, sends the bill to President Barack Obama for his signature. The president supports a repeal of the 1099 provision, but he doesn’t like how the bill makes up for the revenue that would be lost: It requires people who receive higher subsidies for health insurance than they should have to repay this money to the government. Despite his objections, Obama is expected to sign the bill.

The Senate defeated an amendment by Senator Robert Menendez of New Jersey that would rescind the bill’s subsidy repayment requirement if a study finds that would increase health insurance premiums or reduce coverage for small businesses.

“We all want 1099 repealed,” Menendez said. But he added that small businesses and their employees could be hurt by a “payback tax” from the subsidy repayment requirement.

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